SEBI registration is a must for all investment advisers — both individual and corporate, according to a new regulation by market regulator SEBI.
However, professionals such as lawyers, chartered accountant and those giving generic view on economic situation without charging and incidental to discharging their professional services are exempt, said a SEBI notification of late Monday night. SEBI has mandated a minimum net worth requirement of Rs 25 lakh for corporate and Rs 1 lakh for individuals.
Advisers also have to disclose information about themselves to the client including those with the potential of creating conflict of interest.
“It is a good start to bridge the trust deficit between the client and adviser. However, the mechanism to measure how an adviser adds value to a client needs to be evolved in a standardised format,” said A.V. Srikanth, CEO, Motilal Oswal Wealth Management Private Ltd.
Legal experts felt that the new regulations are cumbersome. “The new Investment Advisers Regulations seek to impose numerous compliances on the investment advisers from the perspectives of disclosures, record maintenance and risk profiling of clients, some of which may be good to have but not practical.
“SEBI also seems to be contemplating a scenario wherein once a SRO is identified, the regulation of investment advisers may be delegated to such a body. In the absence of such delegation, it would be a daunting task for SEBI to regulate hundreds of thousands of investment advisers. Hence the new regime would be challenging for both investment advisers and SEBI,” said Tejesh Chitlangi of Finsec Law Advisers.
raghavendrarao.k@thehindu.co.in